When Should I File For Social Security? Part 2

The conclusion we made in part 1 was that as long as you lived beyond age 79 it made sense to delay filing for Social Security until age 70 since the total benefit received was higher than you received if you filed at age 62. This ignores the time value of money - the fact that the social security benefit received can realize a positive return.

The chart shows that if you can achieve a positive real return, that is a return above inflation, on the social security benefits received, the age at which the total benefit for filing later exceeds the total benefit for filing earlier increases. If we define the point at which the total benefits for filing at age 70 exceeds the total benefits for filing at age 62 as the "crossover age", the point at which the real return is high enough such that the crossover age exceeds the life expectancy determines the return you need to receive to switch from filing at age 70 to filing at age 62. With a life expectancy of around 85 years, you need a real return of higher than 4% annually to have the total benefit (including returns) of filing at age 62 be greater than the total benefit (including returns) of filing at age 70.

It is possible to achieve a real returns higher than 4% although it will likely require higher volatility or higher risk assets.

Here is a list of historical real returns and volatility for some common assets.

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

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